Our impact investing: one year on

For centuries, our predecessors managed the Foundation’s growing assets to make an impact on people’s health in what are today the London boroughs of Lambeth and Southwark.

Early last year, we decided to build on that by aligning our investing more closely with our charitable work. We allocated £40 million (5% of our endowment) to investments that improve health in the UK as well as giving us competitive financial returns.

Since we committed to our first investment, we have learned a lot about where we can focus to best achieve our goals and what some of the key challenges are going to be moving forward.

Where we focus our investing

One year on, we have a bespoke impact investment strategy that aligns strongly with our organisation’s mission.

We have worked hard to arrive at it, collaborating with specialist impact investing consultants Tideline to identify market sectors that resonate strongly with improving health in the UK.

To date we have identified two broad categories, enabling us to explore opportunities in:

• clinical healthcare such as healthcare delivery, medical devices and life sciences
• the wider determinants of health – where we are looking at areas like affordable housing, environmental health, financial inclusion, food and nutrition, and community services and education.

Our focus is to invest in funds which back organisations whose products and services help people live healthier lives in the UK.

Our impact investments to date

Since we started our impact investment journey early last year, we have committed £16 million to investment funds:

• Our first investment was in Apposite Healthcare Fund, a healthcare specialist private equity investor focused on healthcare delivery throughout the UK.
• We also invested in Resonance’s latest property fund launch, Real Lettings Property Fund 2, supporting them and charity St Mungo’s to tackle homelessness and related ill health in London.

• At the end of last year, we invested in an outcomes-based investing fund. The fund backs social outcomes contracts that aim to deliver health-related public services in more effective and accountable ways than they normally would be.

This is an exciting portfolio – the funds are quite different in their geographical reach, investing style and in the problems they address.

Impact investing experiences

One year into our impact investing journey, we’ve learnt some key things along the way:

• It takes time to find good investment opportunities. We are looking for funds that can deliver great health impact and attractive returns. The market is still developing which means there is a limited pool of high-quality funds to invest in. Hopefully more investors like us getting involved in the field will encourage even more of these funds.
• We need to be flexible. Ideally every investment opportunity would combine top returns and impact. In reality, each presents a different balance of the two. We’ve found that we need to be open-minded about good ideas and think about our impact investments as a portfolio – not a series of one-offs.
• Measuring impact is challenging. The diversity of our impact investments raises questions about the best way to measure and report on health impact. The Impact Management Project – a global forum on impact measurement – is a great tool to help us get started and we will be exploring this topic a lot more over the coming year.

Opportunities ahead

So far, we have been able to identify three funds strongly aligned with our impact focus that we are proud of. We’re keen to find others.

This year, we are considering early-stage investing in life sciences. Our longer term ambition is to invest in early health-related interventions and tackle wider determinants of health.

Biotechnology boosted by the unprecedented wave of innovation in science and technology is exciting territory. We are exploring early-stage investment given the immense growth over the last few years in start-ups and credible venture capital managers.

Our long-term focus is on addressing the wider determinants of health. Our plan is to continue with our search and dialogue in the markets, working with peers and being patient as the market grows.

Moving impact investing into the mainstream

We want to learn from others in our industry and share with them our experiences as a health impact investor.

That is why this week, I am delighted to be speaking on a panel at the Investors’ Forum in Geneva, where investors and fund managers gather to examine the latest industry trends, share lessons and explore what lies ahead.

We already collaborate with Big Society Capital who champion the impact investment community in the UK and with the European Investment Fund, global leaders in impact investing.

At the conference and beyond, I am keen to hear from others who can share investment ideas, want to collaborate and may help us bring impact investing into the mainstream in the UK. If you are interested, get in touch with T Clark, our Director of Private Markets.